NIFTY NEARS 11250 SUPPORT

NIFTY NEARS 11250 SUPPORT

WORLD MARKETS

US indices climbed 0.5%-0.8% despite a further escalation in the ongoing trade war between Washington and Beijing as investors considered the latest tariffs to be not as bad as previously feared. Tech shares bounced back from Monday's sell-off.

After the Trump administration announced 10% tariffs on approximately $200 billion worth of Chinese imports from Sept. 24, China announced that it was placing tariffs on approximately $60 billion worth of goods from the U.S. Some products which had previously been designated a 20% tariff, however, were revised down to 10%.

The yield on the benchmark 10-year Treasury note rose 5 bps to 3.055%, its highest level since May 23.

WTI climbed 94 cents or 1.4% to $69.85 a barrel and Brent rose $1.01 or 1.3% to $79.06 on signs that OPEC would not be prepared to raise output to address shrinking supplies from Iran, and as Saudi Arabia signaled an informal target near current levels.

European markets, except a marginally lower FTSE, gained 0.3%-0.6%.

AT HOME

Sensex and Nifty tumbled 0.8% and 0.9% respectively, extending the losing streak to second consecutive day and closing at the lowest level since 2nd August, marking a one and a half month low. Sensex lost 295 points to settle at 37290 while Nifty finished at 11278, down 98 points. BSE mid-cap and small-cap indices slipped 1.5% each. Except a 0.9% higher FMCG index, all the BSE sectoral indices ended in red with Realty and Power indices leading the tally, down 3.1% and 2% respectively.

FIIs net sold stocks and stock futures worth Rs 1144 cr and 1162 cr respectively but net bought index futures worth Rs 965 cr. DIIs were net buyers to the tune of Rs 265 cr.

Rupee depreciated 46 paise to end at record low of 72.97/$.

SEBI, after its board meeting yesterday, announced opening of commodity derivative market to foreign investors, cutting the listing timeline after an IPO to T+3 from T+6 at present and reduction in total expense ratio for investing in mutual funds. It also said that a revised circular on KYC norms for FPIs will be issued soon and mandated large firms to tap the bond market for 25% of incremental borrowings.

The stock of Bank of Baroda and Vijaya Bank ended the day trading lower by 16.6% and 6.3% respectively while Dena Bank hit the upper circuit. This is after the government declared its intentions to amalgamate the above banks.  Dena Bank is the weakest amongst the lot of the amalgamating banks with net non-performing assets exceeding 11%. The stock of Dena Bank surged as a weaker bank is getting subsumed in a much larger strong franchise. This is the same reason why Bank of Baroda and Vijaya Bank fell.  These good banks will now have a weaker franchise i.e Dena Bank under its umbrella, which may not be value accretive for their shareholders. Hence, there was heavy selling seen in their stocks.

OUTLOOK

Today morning, Nikkei and Hang Seng are up 1.5% and 0.5% respectively while Shanghai if flat. SGX Nifty is suggesting a flattish start for our market.

After Nifty broke the 11430-11380 support zone, we had said that "11340, the 67% retracement level of the recent 11250-11523 upmove, is the next support to eye below which 11250, the bottom made last week, would be the next important support.

Nifty touched a low of 11268 before closing at 11278, achieving 11340 target and moving very close to 11250 target.

11250, the bottom made last week, continues to be immediate support, upon breach of which 11160, the 50% retracement level of the 10560-11760 upmove, would be the next support to eye.

11523, the top made Friday, continues to be immediate hurdle.